Marketmind: Japan inflation could pile pressure on yen, BOJ

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever

Inflation figures from Japan, which could put the central bank’s ultra-loose monetary policy under even more intense scrutiny, and a smattering of Chinese earnings are the juiciest morsels for investors in Asia to get their teeth into on Friday.

Analysts expect Japan’s core annual inflation rate in July rose to 2.4% from 2.2% in June. That would be the highest since late 2014 and further above the Bank of Japan’s goal of 2.0%.

It would mark months above target, raising further doubts over the BOJ’s policy of buying unlimited amount of bonds to cap the 10-year yield at 0.25%, a policy that runs counter to the rate-raising trend across the developed world.

The divergence between Japanese and U.S. yields has pushed the yen down 15% so far this year, on course for its biggest fall against the dollar since 2013 and third steepest since the era of free-floating exchange rates began in the early 1970s.

The yen is trading around 136 per dollar, and an uncomfortable inflation print could push it closer towards last month’s 24-year low near 140 per dollar.

In China, retail banking giant China Merchants Bank releases half yearly results. These could offer a glimpse into the impact of the country’s debt-ridden property sector on banks, as a growing number of homebuyers threaten to stop paying mortgages on hundreds of unfinished housing projects.

Results are also due from smartphone maker Xiaomi Corp, which is struggling amid the industry’s smartphone volumes falling to a decade low as COVID-19 lockdowns batter demand.

Xiaomi started constructing its first car factory in Beijing earlier this year, and aims to be mass producing electric vehicles by the first half of 2024. Future rival EV maker Nio Inc, meanwhile, also releases Q2 earnings on Friday.

Key developments that should provide more direction to markets on Friday:

Japan inflation (July)

Indonesia current account (Q2)

Earnings reports from China Merchants Bank, Xiaomi, Nio

(This story has been refiled to clarify day in last paragraph as Friday, not Thursday)

(Reporting by Jamie McGeever in Orlando, Florida and Anshuman Daga in Singapore; Editing by Sandra Maler)